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70 U. Miami L. Rev. 830 (2015-2016)
How the Internet, the Sharing Economy, and Reputational Feedback Mechanisms Solve the Lemons Problem

handle is hein.journals/umialr70 and id is 858 raw text is: How the Internet, the Sharing Economy, and Reputational Feedback Mechanisms Solve the Lemons Problem ADAM THIERER,* CHRISTOPHER KOOPMAN,** ANNE HOBSON,*** AND CHRIS KuIPER**** This paper argues that the sharing economy-through the use of the Internet and real time reputational feedback mechanisms-is providing a solution to the lemons problem that many regulators have spent decades attempting to over- come. Section I provides an overview ofthe sharing economy and traces its rapid growth. Section II revisits the lemons theory as well as the various regulatory solutions proposed to deal with the problem of asymmetric information. Section III discusses the relationship between reputation and trust and analyzes how reputational incentives affect commercial interactions. Section IV discusses how information asymme- tries were addressed in the pre-Internet era. It also discusses how the evolution of both the Internet and information sys- tems (especially the reputational feedback mechanisms of the sharing economy) addresses the lemons problem. Sec- tion V explains how these new realities affect public policy and concludes that asymmetric information is not a legiti- mate rationale for policy intervention in light of technologi- cal changes. We also argue that continued use of this ra- tionale to regulate in the name of consumer protection * Senior Research Fellow, Mercatus Center at George Mason University ** Research Fellow, Mercatus Center at George Mason University, Adjunct Professor, George Mason University School of Law. LL.M., George Mason Uni- versity School of Law, 2014; J.D., Ave Maria School of Law, 2012. MA Fellow, Mercatus Center at George Mason University. MA Fellow, Mercatus Center at George Mason University. 830

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